On October 31, 2018, the United States Securities and Exchange Commission (“SEC”) adopted amendments to the existing property disclosure requirements for mining companies registered with the SEC (“Registrants”). The amendments consolidate the disclosure requirements previously set forth in Item 102 of Regulation S-K and in Industry Guide 7 by relocating them in a single set of rules in the new subpart 1300 of Regulation S-K. The SEC intends to provide investors with a more comprehensive understanding of Registrants’ mining properties, while removing existing requirements that put U.S.-based mining companies at a competitive disadvantage. The new disclosure regime conforms with industry and global regulatory practices and standards as identified by the Committee for Mineral Reserves International Reporting Standards (“CRIRSCO”), which includes Canada’s National Instrument 43-101, Australia’s Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC) and South Africa’s Mineral Reporting Codes (SAMREC). The final rules came into force on February 25, 2019, but full compliance will not be required for Registrants until the first fiscal year beginning on or after January 1, 2021.
The amendments include:
1.Disclosure where a Registrant’s mining operations are material to its business or financial condition
The new rules introduce a single standard of materiality for requirements to disclose exploration results and activities, mineral resources, and mineral reserves. The SEC has defined “material” as a substantial likelihood a reasonable investor would attach importance to the information in determining whether to buy or sell the securities registered. A Registrant must consider quantitative and qualitative factors and the aggregation of all its mining properties in determining the materiality of its mining operations to its business or financial condition.
2.Individual disclosure and summary disclosure
Individual disclosure will be required for any single mining property that meets the materiality threshold. Individual disclosures are intended to give investors more relevant information about the individual properties and assets that generate a Registrant’s revenue. The specified information required by individual disclosure will be similar to the disclosure called for under the current rules, including a description of the condition of the property, the Registrant’s current or proposed program of exploration or development of the property, and copies of the technical report summary for any new disclosures of mineral resource or reserve estimates. Registrants will also be required to provide a comparison of the property’s mineral resources or reserves as of the end of the last fiscal year with the resources or reserves as of the end of the preceding fiscal year, and to explain any material changes between the two.
Registrants with multiple mining properties will need to file a summary disclosure in addition to any individual disclosures. This will provide an overview of the company’s mining properties and operations and include tables disclosing its mineral resources and mineral reserves as of the end of the most recent fiscal year. Where a Registrant has multiple mining properties, none of which are individually material but which are material when considered in the aggregate, only the summary disclosure will be required.
3.Disclosure of mineral resources
The ability to disclose mineral resources is one of the most significant changes arising from the amendments. This development is intended to put Registrants on a more level playing field with foreign-listed companies that are subject to CRIRSCO-based mining codes.
Registrants will be required to disclose material mineral resources that have been determined to exist based on information and supporting documentation prepared by a qualified person. There will not be any affirmative requirement for a company to determine its mineral resources until it wants to declare them in a filing. Registrants will also be required to classify their mineral resources into inferred, indicated and measured types, in accordance with the CRIRSCO classification standard.
4.Changes to mineral reserve disclosure
The new rules introduce a new definition of “mineral reserve” and permit Registrants to rely on either pre-feasibility or final feasibility studies to support a determination of their mineral reserves.
5.The “qualified person” requirement
The amendments requires that every disclosure of mineral resources, mineral reserves and material exploration results be based on, and accurately reflect, information and supporting documentation prepared by a qualified person or group of qualified persons. A qualified person is someone who is both:
- a mineral industry professional with a minimum of five years relevant experience in the type of mineralization and deposit under consideration, and in the type of activity that professional is undertaking on behalf of the Registrant; and
- a member or licensee of a recognized professional organization in good standing at the time the applicable report is prepared.
Under the new regime, a technical report summary must be prepared, signed and dated by a qualified person and filed as an exhibit to the applicable SEC filings when a Registrant first discloses its mineral resources or mineral reserves, or when there has been a material change in the mineral resources or mineral reserves from the last report summary.
When preparing a technical report summary, a qualified person may rely on assistance and information provided by the Registrant to consider specified “modifying factors” that lie outside the expertise of that qualified person, such as legal, environmental and governmental matters or marketing plans within the control of the Registrant. Where the Registrant is relied upon for this information, the qualified person will not be subject to expert liability under Section 11 of the U.S. Securities Act in respect of those matters. However, the qualified person may not disclaim liability for information provided by third party specialists.